EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
THIS AGREEMENT OF PURCHASE AND SALE OF ASSETS (the "Agreement") is dated this
11th day of January, 2002, by and among THE RIVAL COMPANY, a Delaware
corporation ("Rival"), THE HOLMES GROUP, INC., a Massachusetts corporation
("Holmes"; and together with Rival, "Sellers") and CONAIR CORPORATION, a
Delaware corporation (the "Purchaser"), with a later "Effective Date" as
provided for herein.
BACKGROUND STATEMENT
A. The transaction contemplated by this Agreement relates to the sale of
assets of Holmes' division manufacturing and selling certain identified
"Products" (as defined below) under the Pollenex(R) tradename (the
"Business"); certain assets of which arE owned by Holmes and others by
Rival.
B. Sellers desire to sell certain of the assets necessary to operate the
Business and Purchaser desires to purchase such assets of the Business,
specifically excluding the Excluded Assets (as hereinafter defined) for
the Purchase Price (as hereinafter defined) and upon the terms and
subject to the conditions hereinafter set forth.
STATEMENT OF AGREEMENT
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereby agree as follows:
1.0 PURCHASE AND SALE OF BUSINESS AND ASSETS.
1.1 ASSETS TRANSFERRED. On the "Effective Date" (as defined below), Sellers
shall sell, assign and deliver to Purchaser, free and clear of all
liabilities, obligations, liens and encumbrances of any kind other than
the Assumed Liabilities and except as expressly set forth herein, and
Purchaser shall purchase and acquire from Sellers, all right, title and
interest in and to the following properties, assets and rights owned by
Sellers, excluding the Excluded Assets (collectively, the "Purchased
Assets"):
(a) all inventories of finished products and any work-in-process
and components owned and held by Sellers on the Closing Date
and having a product number or product code identified on
SCHEDULE 1.1(a)(I) and all packaging materials relating
thereto (collectively, the "Inventories"), including
Inventories in transit to Sellers and Inventories at any
location, whether or not controlled by Seller, but excluding
the inventories of products identified by product number or
product code on SCHEDULE 1.1(a)(II) (the "Excluded
Inventory");
(b) all rights to sell products having a product number or product
code identified on SCHEDULE 1.1(a)(I) (collectively,
"Products") and all products currently under development as
identified on SCHEDULE 1.1(b) (the "Products Under
Development"), but excluding rights to sell finished products
having a product number or product code identified on SCHEDULE
1.1(a)(II), whether sold under the Pollenex brand name for a
limited period of time as provided for in Section 1.3 hereof
or under another brand name (the "Excluded Products");
(c) the tooling, dies and molds specified on SCHEDULE 1.1(c),
except for those items on such Schedule which are marked with
a 50%/50% designation, (collectively, the "Tooling"), together
with (i) such interest, if any, that Sellers may hold in the
tooling, dies and molds specified on SCHEDULE 1.1(c) and
marked with a 50%/50% designation and (ii) whatever interest
Sellers may hold in any tooling, dies and molds not listed on
SCHEDULE 1.1(c) which are used in the manufacture of the
Products, in all cases located at the several facilities of
third party manufacturers of Products or Products Under
Development ("Third Party Manufacturers"), together with any
transferable manufacturer warranties relating to the Tooling;
(d) all transferable rights (including rights that become
transferable pursuant to SECTION 9.1 of this Agreement or
otherwise pursuant to the consent or approval of third
parties) of Sellers relating to the Purchased Assets or the
Business under all written or oral contracts, arrangements,
license and technology agreements and other agreements;
including without limitation all open purchase orders and,
subject to Section 4.1(e) hereof, open customer orders
relating to Products, Products Under Development and
Inventories (collectively, the "Contracts"), but excluding
distribution agreements and sales representative arrangements,
purchase orders and customer orders relating to Excluded
Inventories and customer orders for Products and Inventories
fulfilled by Sellers prior to the Closing Date (the "Excluded
Contracts");
(e) (i) all patents and patent applications identified on SCHEDULE
1.1(e)(i), (ii) subject to the license back to Sellers set
forth in Section 1.3, all trademarks, service marks and trade
names identified on SCHEDULE 1.1(e)(ii), and any registrations
and applications therefore, and all common law trademarks used
solely in connection with the Products (the "Pollenex Marks"),
(iii) subject to the license back to Sellers set forth in
Section 1.3, all copyrights, all copyright registrations and
applications for copyright registrations identified on
SCHEDULE 1.1(e)(iii), and any other non-registered copyrights
used in connection with the marketing, promotion and sale of
the Products or Products Under Development (the items
described in clauses (i), (ii) and (iii) are collectively
referred to as the "Intellectual Property"), together with all
files relating to the prosecution or maintenance of any item
of Intellectual Property in the possession of Sellers or their
agents;
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(f) all designs, plans, product drawings, trade secrets,
inventions, data, processes, procedures, technology,
techniques, blueprints, drawings, surveys, research and
development files, computer files, research records,
manufacturing know-how, manufacturing formulae, and similar
information, wherever located, relating to the manufacture of
Products or Products Under Development by Sellers or by third
parties or relating to Tooling (collectively, the "Know-How");
(g) to the extent relating to the Business, all manuals,
information, computer files and other catalogs, mailing lists,
price lists, lists of customers, production data, marketing,
advertising and promotional materials and records (including
without limitation items relating to Products displayed in
Sellers' industry trade booth), purchasing materials and
records, manufacturing and quality control records and
procedures and other similar materials;
(h) to the extent their transfer is permitted by law or applicable
regulations or guidelines, any licenses, permits, approvals,
license applications and product registrations issued by any
governmental agency or pursuant to any regulatory,
engineering, industrial or other codes, including without
limitation those of Underwriters Laboratories ("Permits"); and
(i) subject to Section 1.2 hereof, all rights to bring or maintain
claims, suits or proceedings with respect to the Purchased
Assets which have not arisen prior to the Closing Date or been
brought or maintained by Sellers prior to the Closing Date.
1.2 EXCLUDED ASSETS. Sellers retain and do not transfer (a) cash and cash
equivalents of Sellers or the Business, (b) any accounts receivable of
Sellers or the Business, (c) the Excluded Inventory, (d) the Excluded
Contracts, (e) the Excluded Products and (f) any contractual claims
Sellers may have against third parties for damages, indemnification or
otherwise arising under one or more Contracts, and arising from damage
or injury suffered by Sellers either before or after Closing and
relating to the Excluded Liabilities (collectively, the "Excluded
Assets").
1.3 SELLERS' USE OF POLLENEX MARKS. Purchaser acknowledges and agrees that
Sellers will continue to manufacture, market and sell Excluded Products
following Closing, and that such sale will utilize and involve the
Pollenex Marks. Purchaser agrees that Sellers may use, and to the
extent necessary hereby grants to Sellers a non-exclusive and
irrevocable license to the Pollenex Marks to the extent necessary to
manufacture, market and sell the Excluded Products for a period of nine
(9) months following the Closing Date; PROVIDED THAT Purchaser may
terminate such license with respect to any individual Excluded
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Product if the quality of such Excluded Product as sold by Sellers
under the Pollenex Marks has declined in such a manner and to such an
extent that continued use of the Pollenex Marks in connection with the
Excluded Product would have a detrimental effect on Purchaser's
goodwill associated with the Pollenex Marks. On the sixty-first day
after Closing, Sellers shall pay to Purchaser a one-time license fee in
the amount of Twenty-Five Thousand Dollars ($25,000).
2.0 ASSUMPTION OF LIABILITIES.
2.1 ASSUMED LIABILITIES. Subject to the terms and conditions of this
Agreement, as of the Closing Date Purchaser assumes and agrees to
perform and discharge the following, and only the following liabilities
of Sellers incurred in the ordinary course of operating the Business
(the "Assumed Liabilities"):
(a) all liabilities arising from and after the Closing Date under
and pursuant to all Contracts;
(b) all liabilities and responsibility for warranty and breach of
warranty obligations and claims for Products ("Warranty
Claims") arising after the Closing Date, including, without
limitation, warranty returns, service, replacement or
reimbursement obligations, PROVIDED HOWEVER that Purchaser
shall not assume and Sellers shall be solely liable and
responsible for any and all obligations arising from or
related to Warranty Claims in accordance with the following
schedule:
Closing through 4/11/02: 100%
4/12/02 through 6/11/02: 70%
6/12/02 through 7/11/02: 50%
7/12/02 through 8/11/02: 40%
8/12/02 through 10/11/02: 20%
10/12/02 through 1/11/03: 10%
(c) all liabilities for any claims, losses and damages resulting
from injury or death of any person, or any damage to property,
caused by any Product which either (i) bears a manufacture
date after the Closing Date, (ii) otherwise can be
conclusively demonstrated by evidence produced in conjunction
with the product liability claim to have been manufactured
after the Closing Date or (iii) bears a manufacture date prior
to or on the Closing Date but has been modified in any way
material to the use or consumer's understanding of the
Products after the Closing by Purchaser or its agents
(including as to packaging or directions for use included in
Product packaging; and
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(d) with respect to Products which are not described in subsection
(c) and as to which it cannot be ascertained whether Sellers
or Purchase manufactured the Product, all liabilities for any
claims, losses and damages resulting from injury or death of
any person, or any damage to property caused by any Product,
which claim is made after Closing and alleging an occurrence
after September 30, 2002.
2.2 EXCLUDED LIABILITIES. Except as expressly set forth above, Purchaser
does not assume, and Sellers will pay, honor and discharge, all
liabilities, obligations and commitments of any kind relating to or
arising out of the operation of the Business prior to the Closing Date
(the "Excluded Liabilities"). Without limitation, the Excluded
Liabilities include responsibility for crediting customer accounts in
connection with return authorizations requested by Sellers' customers
relating to Products purchased by them prior to Closing, and accepted
for return by Purchaser, if the following procedures have been followed
in connection with such return authorization:
(i) The return authorization is requested within sixty
(60) days of the Closing Date;
(ii) Prior to accepting the return authorization, Ron
Diamond of Purchaser shall have contacted Greg White
of Sellers and in good faith established that the
return authorization is in accordance with industry
standards and past practice of Sellers and
Purchasers;
(iii) The parties shall have discussed the proposed return
authorization and any reasonable alternatives, such
as marks downs of the affected Products, and shall
further have discussed whether the proposed return
authorization is in the nature of a customer
concession;
(iv) All parties agree to conduct such discussions in good
faith and on an expedited basis; and
(v) After discussion in accordance with these procedures,
the parties shall take such actions with regard to
proposed return authorizations as may be mutually
agreed upon.
(vi) If Sellers' customer Walmart requests return
authorizations in connection with any "reset" of
products involving Products, Ron Diamond may take
such action with regard to such return authorization
as he in good faith determines to be reasonable,
after consultation with Greg White.
(vii) Purchaser and Sellers can each designate a
representative other than Ron Diamond and Greg White,
respectively, to take action under this Section 2.2.
Any disagreements between the parties relating to return authorizations
shall be resolved by arbitration pursuant to Section 13 hereof.
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2.3 MECHANICS RELATING TO WARRANTY CLAIMS. With respect to Warranty Claims
which arise between the Closing Date and June 11, 2002, Sellers shall
(a) accept return of the defective Products relating to such Warranty
Claims from customers, (b) make payment (whether directly or through
adjustment to customer accounts) to customers and (c) invoice Purchaser
for the percentage of such Warranty Claims for which Purchaser is
responsible under Section 2.1(b). With respect to Warranty Claims which
arise between June 12, 2002 and January 11, 2003, Purchaser shall (a)
accept return of the defective Products relating to such Warranty
Claims from customers, (b) make payment (whether directly or through
adjustment to customer accounts) to customers and (c) invoice Sellers
for the percentage of such Warranty Claims for which Sellers are
responsible under Section 2.1(b). All invoices rendered under this
Section 2.3 shall be paid net thirty (30) days. With Purchaser's
consent (which will not unreasonably be withheld), in lieu of accepting
return of defective Products Sellers may authorize customers to destroy
defective Products in the field, subject to customary industry
standards for such practices. At any time Purchaser may request that
defective Products which otherwise would be returned to Sellers or
destroyed in field be returned directly to Purchaser, at its expense.
3.0 CLOSING; PURCHASE PRICE.
3.1 CLOSING; EFFECTIVE DATE. This Agreement is being executed and delivered
by exchange of closing documents via fax and e-mail on the date hereof,
and shall be deemed consummated and become effective (the "Closing")
upon payment of the Purchase Price pursuant to Section 3.2 hereof (the
"Effective Date"). The time period between execution and delivery of
this Agreement and the "Payment Date" (as defined in Section 3.2) is
required solely because Purchaser's banking institution was closed at
the time of execution and delivery, such that Purchaser was not able
simultaneously to make payment of the Purchase Price. Accordingly,
consummation of this Agreement remains subject to Purchaser's payment
of the Purchase Price pursuant to Section 3.2 hereof only, and payment
of the Purchase Price and consummation of the transactions contemplated
hereby by both parties is subject to no conditions. Upon payment of the
Purchase Price and consummation of this Agreement, the Closing shall be
deemed effective as of 12:00:01 a.m. on the Effective Date (also herein
referred to as the "Closing Date").
3.2 PURCHASE PRICE AND PAYMENT. The purchase price (the "Purchase Price")
for the Purchased Assets is Fifteen Million One Hundred Thousand
Dollars US ($15,100,000.00). The Purchase Price, less the "Escrow
Amount," shall be paid in cash by wire transfer to an account
designated by Sellers, with such wire transfer to be initiated by
Purchaser no later than 10:00 am EST on January 14, 2002 (the "Payment
Date").
3.3 ESCROW. Simultaneously with payment of the Purchase Price, One Million
Five Hundred Thousand Dollars US ($1,500,000.00) of the Purchase Price
shall be placed in escrow (the "Escrow Amount") with Posternak,
Blankstein & Lund, L.L.P. (the "Escrow
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Agent"), pursuant to an Escrow Agreement in the form attached hereto as
EXHIBIT 3.3 (the "Escrow Agreement").
3.4 ALLOCATION OF PURCHASE PRICE. Within ninety (90) days of the Closing,
Sellers and Purchaser shall agree in writing upon an allocation of the
Purchase Price and Assumed Liabilities among the Purchased Assets and
the noncompetition covenants set forth in Section 8.3 ("Allocation
Schedule"). Such allocation shall be made in accordance with the
provisions of Section 1060 of the Internal Revenue Code of 1986, as
amended, and shall be binding upon the Sellers and the Purchaser for
all purposes. Purchaser and Sellers agree to (i) be bound by the
Allocation Schedule, (ii) act in a manner consistent with the
Allocation Schedule in the preparation of financial statements and
filing of all state and United States federal income tax returns
(including, without limitation, providing the other for their review a
draft of Form 8594 and thereafter filing Form 8594 with its United
States federal income tax return for the taxable year that includes the
Closing Date) and in the course of any tax audit, tax review or tax
litigation relating thereto, and (iii) take no position and cause any
of their Affiliates (which term is defined as set forth in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act
of 1934, as amended) to take no position inconsistent with the
Allocation Schedule for any tax purposes or in any judicial proceeding.
3.5 BREACH OF OBLIGATION TO CLOSE. A party which fails to consummate the
transactions contemplated hereby on the Payment Date shall be deemed to
be in material breach of its obligations hereunder, unless such failure
results from the other party's failure so to consummate the
transactions (a "Closing Breach"). In the event of a Closing Breach by
a party, the other party shall be entitled to liquidated damages in the
amount of Five Hundred Thousand Dollars US ($500,000.00), which both
parties agree to be a reasonable estimation of actual damages in the
event of a Closing Breach. Liquidated damages provided for hereunder
shall be a party's sole and exclusive remedy for a Closing Breach by
the other party. Notwithstanding Section 13 hereof, a party may bring
an action in a court of competent jurisdiction to enforce its rights
under this Section 3.5. Upon a Closing Breach, this Agreement shall be
deemed null and void and of no further force and effect, except for the
provisions of this Section 3.5 and Sections 7.3 and 15.10.
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4.0 TRANSITION PERIOD; TRANSFER OF PURCHASED ASSETS.
4.1 INVENTORY.
(a) At Purchaser's option, following the Closing Date and for a
period of up to forty-five (45) days thereafter (the
"Inventory Transition Period"), Sellers will continue to
accept and fulfill customer orders for Products (the
"Post-Closing Orders") from Inventories located at Sellers'
facilities for the account of Purchaser. Sellers shall accept
and fulfill Post-Closing Orders on the same terms and
conditions as such orders were fulfilled prior to Closing,
unless Purchaser directs otherwise in advance in any instance.
Purchaser agrees to reimburse Sellers for all direct costs of
storage and shipment of Inventories for Purchaser's account,
but no additional fees shall be assessed for the transition
services provided for in this section.
(b) Not later than the end of the Inventory Transition Period, or
at any time prior to that upon Purchaser's election by giving
reasonable notice to Sellers, Purchaser shall remove all
Inventories from Sellers' facilities utilizing shippers of its
choice and at its cost and expense. Purchaser agrees to
provide sufficient notice to Sellers to coordinate assembly of
Inventories and shipment.
(c) At such time as (i) Purchaser removes Inventory from Sellers'
facilities, (ii) Sellers ship Inventory on Purchaser's behalf
pursuant to customer order or (iii) Inventories consisting of
goods in transit are delivered directly to Purchaser's
facilities, all items of Inventory shall be counted and
recorded, and Purchaser and Sellers shall each be entitled to
have a representative present to observe such count. For
purposes of determining Sellers' compliance with the
representations set forth in Sections 5.3(b) and 5.11, and the
measure of Purchaser's damages for any lack of compliance, (A)
any shortfall in total units of Inventory from the listing
presented at SCHEDULE 5.3(b) and (B) any units that are
determined by the parties not to be usable and salable in the
ordinary course of business, shall be valued in accordance
with the methodology used to determine the reserve set forth
on SCHEDULE 5.3(b) (the "Valuation Method"). Any shortfall in
units of Inventory of any product code shall be offset by any
excess in units of Inventory of any other product codes,
valued in accordance with the Valuation Method.
(d) Promptly following Closing, Sellers and Purchaser will jointly
contact all Third Party Manufacturers to advise them of the
sale of the Business. Purchaser will provide instructions to
each Third Party Manufacturer as to the future manufacture of
Products and as to the storage and shipment of Inventories
located at the respective Third Party Manufacturer's
facilities. Sellers will cooperate with Purchaser to assist in
the transition of the working relationship with each Third
Party Manufacturer, including without limitation by providing
copies of documentation and other materials regarding such
relationship.
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(e) Following the Inventory Transition Period, Sellers shall
forward any new customer orders, return authorizations and
other customer communications they receive with respect to
Products to Purchaser on a twice-weekly basis. Furthermore, if
Products that are subject to return from customers in a manner
consistent with this Agreement are delivered to Sellers rather
than to Purchaser, Sellers will contact Purchaser and permit
Purchaser to remove such Products to its own facilities.
(f) If any customer orders open at Closing relate both to Products
and to Excluded Products, the parties will cooperate in
contacting customers to reissue orders to the relevant party.
(g) Sellers acknowledge that the Inventories contain UPC codes
provided to Sellers by the third party issuer of such UPC
codes. Sellers further acknowledge that Purchaser will utilize
the existing UPC codes in connection with the sale of the
Inventories without any requirement of overlabeling or
application of new UPC codes and Sellers have no objection
thereto.
4.2 TOOLING.
(a) Purchaser acknowledges that all Tooling is located at the
facilities of the Third Party Manufacturers. Within two weeks
following the Closing Date (the "First Examination Period"),
Purchaser shall examine the Tooling located at the facilities
of the Third Party Manufacturers identified on SCHEDULE 1.1(c)
to determine whether such Tooling complies with the
representations and warranties of Sellers contained in SECTION
5.4 hereof. If despite Purchaser's reasonable efforts it
cannot complete such examination within two weeks, it shall
complete its examination of the remaining Tooling within six
weeks following the Closing Date (the "Second Examination
Period"). Any claim by Purchaser of any noncompliance with
such representations and warranties must be made against
Sellers within fifteen (15) days after the end of the relevant
Examination Period (the "Tooling Claim Period").
(b) Following Closing, Purchaser will provide instructions to each
Third Party Manufacturer as to the utilization of the Tooling.
4.3 KNOW-HOW. Sellers shall deliver all Know-How in the possession of
Sellers on Closing. Certain Know-How may be located at the facilities
of Third Party Manufacturers and such Know-How will remain at such
facilities following Closing.
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4.4 RISK OF LOSS. Risk of loss of Inventories, wherever located, and of
Tooling located in Third Party Manufacturer facilities, passes from
Sellers to Purchaser (i) on the earlier to occur of completion of
Purchaser's inspections under Section 4.2(a) or at the end of the
Second Examination Period (with respect to Tooling), or (ii) on the
earliest to occur of any of the events described in Section 4.1(c)(i),
(ii) or (iii) or at the end of the Inventory Transition Period (with
respect to items of Inventory).
4.5. OTHER TRANSITION MATTERS. Upon request with reasonable advance notice,
Sellers agree to accompany Purchaser on visits to up to five (5)
customers of the Business for purposes of transitioning the account.
Sellers further agree to provide reasonable assistance to Purchaser in
the transition of the Business, including without limitation customer
service, MIS and marketing functions relating to the Business. All such
assistance shall be provided at no cost to Purchaser.
4.6 ADDITIONAL TRADEMARKS. During the Inventory Transition Period, the
parties agree to cooperate to identify any common law trademarks that
are used in connection with the Products that have not been transferred
pursuant to Section 1.1(e) hereof, and if Sellers reasonably determine
that such marks are not material to the manufacture, marketing or sale
of other products of Sellers, Sellers shall transfer such trademarks to
Purchaser for no additional consideration.
5.0 REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly and
severally, hereby represent and warrant to Purchaser that:
5.1 CORPORATE ORGANIZATION. Rival and Holmes are each corporations duly
organized, validly existing and in good standing under the laws of
their respective jurisdictions of incorporation and each has all
requisite power and authority to own, lease, license and operate its
properties and assets and to conduct the Business now owned, leased,
licensed and operated by it. Rival and Holmes are duly qualified,
licensed or domesticated and in good standing in each jurisdiction
where the nature of its activities or the character of the properties
owned, leased or operated by each of them in connection with the
Business, require such qualification, licensing or domestication,
except where such failure to qualify would not have a Material Adverse
Effect on the Condition of the Business (as defined in SECTION 5.18
below).
5.2 CORPORATE AUTHORIZATION, CERTAIN CORPORATE ACTIONS, NO CONFLICTS.
Sellers each have all requisite power and authority to execute and
deliver this Agreement and all necessary corporate proceedings have
been taken to authorize the execution, delivery and performance by
Sellers of this Agreement and the transactions described herein. This
Agreement is the legal, valid and binding obligation of Sellers, and is
enforceable as to each of them in accordance with its terms, except as
such validity, binding effect or enforcement may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
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rights generally or by equitable principles relating to the
availability of remedies. Except as set forth in SCHEDULE 5.2 of the
DISCLOSURE SCHEDULE, neither the execution, delivery nor performance of
this Agreement by Sellers, nor consummation of the transactions
contemplated hereby, will, with or without the giving of notice or the
passage of time, or both, either (i) conflict with, result in a
default, right to accelerate or loss of rights under, or result in the
creation of any lien, charge or encumbrance pursuant to, any provision
of either Seller's charter, bylaws or any franchise, mortgage, deed of
trust, lease, license, agreement, understanding, law, rule or
regulation or any order, judgment, or decree to which either Seller is
a party or by which either Seller or any of their respective properties
may be bound or affected or (ii) except as set forth in SCHEDULE 5.2 of
the DISCLOSURE SCHEDULE, require any waiver, consent, approval,
authorization or action of or filing with any third party.
5.3 FINANCIAL INFORMATION. Included at SCHEDULE 5.3 of the DISCLOSURE
SCHEDULE is the following financial information as of December 31,
2001, and as previously provided to Purchaser:
(a) SCHEDULE 5.3(a) fairly presents in all material respects the
net book value (gross book value less appropriate reserves,
including depreciation) calculated in accordance with
generally accepted accounting principles ("GAAP") of the
tooling set forth on SCHEDULE 1.1(c), as such amounts are
carried on Sellers' books and records.
(b) The quantity and the carrying cost of the Inventory, as such
amounts are carried on Sellers' books and records and
calculated in accordance with GAAP, are set forth on SCHEDULE
5.3(b).
(c) Sellers represent and warrant to Purchaser that the items
"Gross Sales" and "Standard Cost of Goods Sold" as set forth
on SCHEDULE 5.3(c) fairly present in all material respects the
gross sales and the standard cost of goods sold for the
Business for the twelve months ended December 31, 2001.
5.4 OPERATIONS OF THE BUSINESS; ADEQUACY OF PURCHASED ASSETS.
(a) Except as set forth in SCHEDULE 5.4(a) of the DISCLOSURE
SCHEDULE, as of the Closing Date the Business is operated only
through Sellers and not through any other direct or indirect
subsidiary or affiliate of Sellers.
(b) Except as set forth in SCHEDULE 5.4(b) of the DISCLOSURE
SCHEDULE, the Purchased Assets comprise all the assets,
properties and rights of every type and description, used or
held for use in or licensed from third parties with respect
to, the operation of the Business by Sellers in the ordinary
course as such Business has been
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operated during the twelve-month period prior to the Closing,
and no assets, properties or rights material to the operation
of the Business as it has been operated by Sellers during such
period are not being transferred to Purchaser hereby. Except
as set forth in SCHEDULE 5.4(b) of the DISCLOSURE SCHEDULE, no
Person (as defined in SECTION 5.18 below) other than the
Sellers has any ownership interest in any such assets.
(c) Except as disclosed in SCHEDULE 5.4(c) of the DISCLOSURE
SCHEDULE, as of the Closing Date all items of Tooling are in
operating condition, are fit for the purposes intended and
have been maintained in accordance with good industry
standards (the "Closing Condition").
5.5 TITLE. Except as disclosed in SCHEDULE 5.5 of the DISCLOSURE SCHEDULE,
Sellers or either of them have good, marketable and legal title to, or
hold by valid and existing lease or license, free and clear of all
mortgages, pledges, liens, or security interests, each piece of
property included as a Purchased Asset.
5.6 LITIGATION; ORDERS. Except as set forth in SCHEDULE 5.6 of the
DISCLOSURE SCHEDULE, there is no claim, legal action, administrative
proceeding, governmental investigation, arbitration or other proceeding
involving amounts in excess of One Hundred Dollars ($100)
(collectively, "Litigation") pending, nor to Sellers' Knowledge (as
defined in SECTION 5.18 below) threatened, against Sellers arising from
or otherwise relating to the Business. As of the date hereof, there is
no judgment or outstanding order, injunction, decree, stipulation or
award (whether rendered by a court or administrative agency, or by
arbitration) against Sellers relating to the Business that would
prohibit the consummation of the transaction contemplated by this
Agreement.
5.7 INTELLECTUAL PROPERTY. SCHEDULES 1.1(e)(i) and 1.1(e)(ii) contain
complete and correct lists of all the patents and registered
trademarks, and applications for the foregoing, both domestic and
foreign, presently owned by Sellers, used or held for use in, licensed
from third parties with respect to, or necessary to the operation of,
the Business as operated by Sellers and relating to the manufacture,
marketing and sale of the Products. Except as set out in SCHEDULE 5.7
of the DISCLOSURE SCHEDULE, the Intellectual Property and Know-How are
owned by Sellers free and clear of any license, sublicense, agreement,
right, understanding, judgment, order, decree, stipulation, lien,
charge or encumbrance of any kind. The rights being transferred to
Purchaser pursuant to this Agreement, including rights to the
Intellectual Property and Know-How, constitute all such rights owned by
Sellers, used or held for use in or licensed from third parties with
respect to the Business as operated by Sellers and relating to the
manufacture, marketing and sale of the Products. To Sellers' Knowledge,
the Products do not infringe upon or otherwise violate any intellectual
property owned by any other Person, and there is no claim or action by
any Person pending, or to Sellers' Knowledge threatened, with respect
thereto. Except as
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described in SCHEDULE 5.7 of the DISCLOSURE SCHEDULE, to Sellers'
Knowledge there is no infringement or improper use by any third party
of the Intellectual Property or the Know-How relating to the Products,
and there is no action or proceeding instituted by Sellers pending in
which an act constituting an infringement of any of the rights to such
Intellectual Property or Know-How was alleged to have been committed by
a third party. SCHEDULE 5.7 of the DISCLOSURE SCHEDULE lists all
licenses, sublicenses or agreements relating to the use by third
parties of the Intellectual Property and Know-How, or the use by the
Business of the intellectual property of another Person, and there is
no default under any such license, sublicense or agreement.
5.8 COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 5.8 of the
DISCLOSURE SCHEDULE, the conduct of the Business materially complies
with all applicable statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto.
5.9 TAXES. Except as disclosed in SCHEDULE 5.9 of the DISCLOSURE SCHEDULE,
other than liens for taxes not yet due and payable, there are no unpaid
taxes, deficiencies, assessments, penalties, interest or other
governmental charges relating to the income, receipts, payrolls,
transactions, capital or other operations of the Business which are or
could become a lien on any of the Purchased Assets. There have been no
examinations pending against, no claims have been asserted against, and
there are no unexpired waivers of any statute of limitations with
respect to any taxes, deficiencies, assessments, penalties, interest or
other governmental charges which could become liens on any of the
Purchased Assets.
5.10 CONTRACTS.
(a) SCHEDULE 5.10 of the DISCLOSURE SCHEDULE contains a listing of
all Contracts, including a full and accurate summary
description of any material oral contracts.
(b) Except as disclosed in SCHEDULE 5.10 of the DISCLOSURE
SCHEDULE and with respect to written Contracts only (not
verbal arrangements), the Contracts are legal, valid, and
effective in accordance with their terms, do not require any
consent or assignment to transfer to Purchaser and there does
not exist thereunder any default or event or condition which,
after notice or lapse of time or both, would constitute a
default thereunder by any party thereto.
Except as disclosed in SCHEDULE 5.10 of the DISCLOSURE SCHEDULE,
neither Sellers nor any other party to a Contract is in material breach
thereof or default thereunder, and to Sellers' Knowledge there does not
exist any event which, with the giving of notice or the lapse of time,
would constitute such a breach or default. Except as otherwise set
forth in SCHEDULE 5.10 of the DISCLOSURE SCHEDULE and with respect to
written Contracts only (not verbal arrangements), all Contracts
described or reflected therein are in full force and effect. To the
extent any Contract (other than purchase orders or sales orders)
requires the consent, notice or approval of another party to be
transferred, such necessary consent, notice or approval
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requirement is designated in SCHEDULE 5.10 of the DISCLOSURE SCHEDULE.
Sellers have provided Purchaser true, complete and correct copies of
all written Contracts other than open purchase orders or customer
orders, which are listed on SCHEDULE 5.10.
5.11 INVENTORIES. All Inventories (other than work-in-process and
components) are of a quality usable and salable in the ordinary course
of business, subject to appropriate reserves. Sellers make no
representation or warranty with respect to the salability of the
Inventories except as expressly provided herein. All Inventories are
located at the locations set forth in SCHEDULE 5.11 of the DISCLOSURE
SCHEDULE.
5.12 CONSENTS, APPROVALS, ETC. There are no filings required to be made by
Sellers with, and there are no consents, approvals, permits or
authorizations required to be obtained by Sellers from, governmental
and regulatory authorities or instrumentalities of the United States,
the several states or any other jurisdiction in connection with the
execution and delivery of this Agreement by Sellers and the
consummation by Sellers of the transactions contemplated hereby.
5.13 DEFECTS IN PRODUCTS OR DESIGNS; PRODUCTS.
(a) To Sellers' Knowledge, assuming manufacture in complete
accordance with Sellers' specifications, there are no defects
in the design of Products or the Tooling that would materially
adversely affect the performance or quality of the Products
and the Tooling is properly designed to produce the Products.
(b) The products manufactured and sold by Sellers have been
designed and manufactured in compliance with all regulatory,
engineering, industrial and other codes generally recognized
as being applicable thereto. Since January 1, 1999, none of
the Products has been the subject of any voluntary or
involuntary recall campaign performed by Sellers or any
voluntary or involuntary recall campaign required by, or
performed in cooperation with, any governmental agency, that
would adversely affect the performance or quality of such
Products and there are no claims or suits alleging violations
of the Fair Packaging and Labeling Act. Sellers have received
no written statements, citations or decisions by any
governmental or regulatory body specifically stating that any
Product made, manufactured, constructed, distributed, sold,
leased, supported or installed at any time by Sellers is
defective or unsafe or fails to meet any standards promulgated
by any such governmental or regulatory body or is misbranded.
Except as set forth in SCHEDULE 5.13(b) of the DISCLOSURE
SCHEDULE, no product liability claims are presently pending
(as to which Sellers have been served) or, to Sellers'
Knowledge, threatened.
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5.14 CUSTOMERS. SCHEDULE 5.14 of the DISCLOSURE SCHEDULE lists, on the basis
of gross sales net returns for the twelve (12) month period ended
December 31, 2001, the five (5) largest customers of the Business, with
gross sales less returns listed ("Customers"). Sellers have received no
written notice from any of the Customers that such Customer will
terminate, cancel or discontinue a substantial portion of the business
it conducts with the Business, which notice states a schedule or time
period for such discontinuation. SCHEDULE 5.14 of the DISCLOSURE
SCHEDULE sets forth, by customer, summaries of the Sellers' pricing,
payment and shipping arrangements with such customer for identified
Products (so-called "FACP Customer Reports"). FACP Customer Reports
representing a significant portion of customers for Products during
2001 are included in such SCHEDULE 5.14. Except as disclosed in
SCHEDULE 5.14 of the DISCLOSURE SCHEDULE, Sellers have not entered into
any express agreement with any customers, whether in writing or verbal,
relating to the purchase and returns terms of Products that are not
reflected in the FACP Customer Reports, except that from time to time
customers exact pricing adjustments from Sellers within customary
industry practices.
5.15 ALL MATERIAL INFORMATION; DISCLOSURE. No representation or warranty
made herein by Sellers, and no statement contained in any certificate
or other instrument furnished or to be furnished to Purchaser in
connection with the transaction contemplated by this Agreement,
contains or will contain any untrue statement of a material fact or
omits or will omit to state any material facts necessary to make the
information contained therein not misleading.
5.16 BROKERS. Sellers have not entered into any arrangement for the
provision of services in connection with this Agreement or the
transactions contemplated hereby that may give rise to an obligation to
pay any brokers' or finders' fees or other commissions.
5.17 CUSTOMER WARRANTIES. Sellers have provided to Purchaser, or will
provide within ten (10) business days of Closing, complete and accurate
copies of the standard warranties given to purchasers of Products
currently in effect with respect to the Products (the "Product
Warranties"). Sellers have not given, nor have any of their
salespersons, employees, distributors or agents been authorized to
give, any warranty that deviates from the Product Warranties.
5.18 CERTAIN DEFINED ITEMS. References in SECTIONS 5.1 THROUGH 5.17 and
elsewhere in this Agreement to (i) "Sellers' Knowledge" shall mean the
facts and circumstances that Sellers knew or should have known after
appropriate inquiry, PROVIDED THAT appropriate inquiry of employees of
Sellers shall be deemed to have been made by inquiry of the following
individuals: Frank Clements, Paul Izzo, Ira Morgenstern, Frank Marino,
Terry Robertson and Jordan Kahn; each of these named individuals has
reviewed this ARTICLE 5.0 and has provided to Sellers the information
known to such individuals regarding the representations and warranties
contained herein; (ii) "Material Adverse
15
Change in the Condition of the Business" or "Material Adverse Effect on
the Condition of the Business" shall mean a change or effect that
likely would have a material adverse change or effect on the Purchased
Assets or the results of operations of the Business; and (iii) "Person"
shall mean any individual, corporation, limited liability company,
partnership, proprietorship, trust or other entity of any kind.
6.0 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants to Sellers that:
6.1 CORPORATE ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease,
license and operate its properties and assets and to conduct the
businesses now owned, leased, licensed and operated by it. Purchaser is
duly qualified, licensed or domesticated and in good standing in each
jurisdiction where the nature of its activities or the character of its
properties require such qualification, licensing or domestication.
6.2 CORPORATE AUTHORIZATION, CERTAIN CORPORATE ACTIONS, NO CONFLICTS.
Purchaser has all requisite power and authority to execute and deliver
this Agreement and all necessary corporate proceedings have been taken
to authorize the execution, delivery and performance by Purchaser of
this Agreement and the transaction described herein. This Agreement is
the legal, valid and binding obligation of Purchaser, and is
enforceable as to Purchaser in accordance with its terms, except as
such validity, binding effect or enforcement may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by equitable principles relating to the availability of
remedies. Neither the execution, delivery, nor performance of this
Agreement by Purchaser will, with or without the giving of notice or
the passage of time, or both, conflict with, result in a default, right
to accelerate or loss of rights under, or result in the creation of any
lien, charge or encumbrance pursuant to, any provision of Purchaser's
certificate of incorporation or bylaws or any franchise, mortgage, deed
of trust, lease, license, agreement, understanding, law, rule or
regulation or any order, judgment, or decree to which Purchaser is a
party or by which Purchaser may be bound or affected.
6.3 LITIGATION; ORDERS. As of the date hereof, there is no judgment or
outstanding order, injunction, decree, stipulation or award, or pending
or threatened claims, suits or litigation against Purchaser that would
prohibit the consummation of the transaction contemplated by this
Agreement.
6.4 CONSENTS, APPROVALS, ETC. There are no filings required to be made by
Purchaser with, and there are no consents, approvals, permits or
authorizations required to be obtained by Purchaser from, governmental
and regulatory authorities or instrumentalities of the United States,
the several states or any other jurisdiction in connection with the
execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the transaction contemplated hereby.
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6.5 ALL MATERIAL INFORMATION; DISCLOSURE. No representation or warranty
made herein by Purchaser, and no statement contained in any certificate
or other instrument furnished or to be furnished to Sellers in
connection with the transaction contemplated by this Agreement (all of
which statements shall be deemed to have been made by Purchaser for all
purposes of this Agreement), contains or will contain any untrue
statement of a material fact or omits or will omit to state any
material facts necessary to make the information contained therein not
misleading.
6.6 BROKERS. Purchaser has not entered into any arrangement for the
provision of any services in connection with this Agreement or the
transactions contemplated thereby that may give rise to an obligation
to pay brokers' or finders' fees or other commissions.
7.0 DELIVERIES AT CLOSING
7.1 DELIVERIES BY SELLERS. Sellers hereby deliver the following closing
documents ("Sellers' Documents"), which shall be deemed held in escrow
and dated and released at the Effective Date upon payment of the
Purchase Price:
(a) to Purchaser, certificates executed by an executive officer of
each Seller, respectively, as to authorization, incumbency and
the investigations required by the provisions of ARTICLE 5.0,
in the form attached as EXHIBIT 7.1(a);
(b) to Purchaser, the Bill of Sale, Assignment and Assumption
Agreement in the form attached as EXHIBIT 7.1(b), duly
executed by an executive officer of each Seller, and all other
documents, certificates and agreements necessary to transfer
to Purchaser good, marketable and legal title to the Purchased
Assets, free and clear of any and all liens thereon;
(c) to Purchaser, assignments of all Intellectual Property in the
forms attached as EXHIBIT 7.1(c), duly executed by an
executive officer of each Seller;
(d) to Purchaser, evidence of release of all liens, charges and
encumbrances on the Purchased Assets, subject to final
approval for release of Sellers' lender;
(e) to Purchaser and the Escrow Agent, the Escrow Agreement.
(f) to Purchaser, the opinion of Posternak, Blankstein & Lund,
L.L.P., counsel to Sellers.
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7.2 DELIVERIES BY PURCHASER. Purchaser hereby delivers the following
closing documents ("Purchaser's Documents"), which shall be deemed held
in escrow and dated and released at the Effective Date upon payment of
the Purchase Price:
(a) to Sellers, a certificate executed by an executive officer of
Purchaser as to authorization and incumbency, in the form
attached as EXHIBIT 7.2(a);
(b) to Sellers, the Bill of Sale, Assignment and Assumption
Agreement in the form attached as EXHIBIT 7.1(b), duly
executed by an executive officer of Purchaser; and
(c) to Sellers and the Escrow Agent, the Escrow Agreement.
7.3 EFFECT OF CLOSING BREACH. Upon the occurrence of a Closing Breach,
Sellers' Documents and Purchaser's Documents shall automatically be
deemed null and void and of no further force and effect, and Sellers
and Purchaser, as the case may be, shall destroy all copies of such
documents, whether received in original, fax or e-mail form.
8.0 POST-CLOSING OBLIGATIONS.
8.1 PRODUCT MARKING. Following Closing, all products manufactured by, or
manufactured by third parties pursuant to orders of, Purchaser relating
in any way to the Products shall be indelibly imprinted, stamped or
otherwise tagged with a distinctive identifying mark which
distinguishes all such products from products manufactured by or on
behalf of Sellers and included in Inventories. Within sixty (60) days
after the Closing Date, Purchaser shall provide to Sellers a sample of
the distinguishing mark for each Product.
8.2 ACCESS AFTER CLOSING. After the Closing, upon reasonable written
notice, Purchaser and Sellers shall furnish or cause to be furnished to
each other and their respective accountants, counsel and other
representatives reasonable access, during normal business hours, to
such information (including records pertinent to the Business) and
assistance relating to the Business as is reasonably necessary for
operations, financial reporting and accounting matters, the preparation
and filing of any returns, reports or forms or the defense of any tax
claim or assessment. In the case of Sellers, such assistance shall
include access to any and all documents, records, files and
correspondence relating to the Business, and Sellers will use
reasonable efforts to maintain at their offices or in offsite storage
for the longer of seven (7) years from its date or two (2) years after
the Closing Date any such documents, records, files and correspondence
that could be needed by Purchaser. In the case of Purchaser, such
assistance shall include reasonably prompt written response to
reasonable written inquiries of Sellers or either of them related to
such financial reporting, accounting and tax matters, cooperation in
responding to audit reports made by taxing authorities to Sellers
regarding the Business, assisting Sellers (including making its
employees reasonably available) in defending any lawsuits or claims
against
18
Sellers with respect to Excluded Liabilities or relating to the
operation of the Business by Sellers prior to the Closing Date and, at
Sellers' request and expense, participation in audits conducted with
respect to Sellers. Purchaser shall use reasonable efforts to retain
the books and records of Sellers included in the Purchased Assets for a
period of seven (7) years after the Closing. After the end of such
respective retention period, before disposing of such books or records,
Purchaser and Sellers, as the case may be, shall use their best efforts
to give notice to such effect to the other party, and such parties,
within a reasonable time after the receipt of such notice, will notify
the others whether to destroy such documents or whether it will, at its
cost and expense, remove and retain all or any part of such books or
records as it may select.
8.3 COVENANT NOT TO COMPETE. The parties acknowledge and agree that
Purchaser is acquiring, and the consideration paid by Purchaser
hereunder reflects, the goodwill of the Business associated with the
manufacture, marketing and/or sale of the Products and Products Under
Development. Therefore, as an inducement to enter into this Agreement
and in partial consideration for the payment to Sellers of the Purchase
Price and the transfer of the Purchased Assets to Purchaser, the
parties agree that for a period of five (5) years following the Closing
Date, except as contemplated under Section 1.3 hereof, neither Sellers,
nor any subsidiaries of either Seller, nor Jordan A. Kahn, individually
(the "Seller Covenant Group") will directly or indirectly engage in any
business which competes with the manufacture, marketing and/or sale of
Products or Products Under Development.
For purposes of this Agreement: the term "compete" includes, without
limitation, (A) owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization
(collectively, an "Entity") which is so engaged, except of a de minimus
interest, (B) consulting with, advising or assisting in any way any
Entity in the business areas where these noncompetition covenants are
effective, which is now or becomes a competitor of Purchaser or (C)
engaging in any practice, the intent of which is to evade the
provisions of these covenants not to compete. The term "compete" is
intended to refer to competition for a purchase by a consumer of a
product of Sellers which performs a comparable function to that of a
Product or a Product Under Development, and does not include offering
for sale or selling any product to retailer customers which may compete
for shelf space, special offers or retailer purchase budgets. Purchaser
acknowledges that Sellers are in the business, among others, of
manufacturing, marketing and selling products that purify, humidify and
scent the air, and, without limitation, their continued development,
marketing and sale of products in these areas will not be deemed to
"compete" with the Products or the Products Under Development; in
particular, no humidification product manufactured, marketed and sold
by Sellers shall be deemed to "compete" with the PFAC5 Facial Care
System, or any part thereof, listed on SCHEDULE 5.3(b).
19
8.4 EXCEPTIONS TO COVENANT.
(a) In the event that any member of the Seller Covenant Group
acquires an entity or business, or an interest in an entity or
business, a part or division of which engages in a business
that would be violative of the covenants contained in SECTION
8.3, such member shall have a period of six (6) months after
closing of such acquisition to divest of all operations that
violate such covenants, and such acquisition and divestiture
shall not be prohibited by or deemed a breach of this
Agreement.
(b) The covenants contained in SECTION 8.3 shall not apply to any
Person which acquires one or more of Sellers and their
business, whether through merger, consolidation, purchase of
stock or assets or otherwise, nor shall it apply to the
business operated by such Person on a consolidated basis with
one or more of Sellers following such transaction.
(c) Nothing herein shall prevent or limit Jordan A. Kahn from
owning, directly or indirectly, any interest that is not a
controlling interest in any Person which may compete in the
manner provided in SECTION 8.3, PROVIDED THAT, Mr. Kahn is not
actively engaged in the business of such Person as a manager
or employee.
(d) Members of the Seller Covenant Group may market, distribute
and sell, in their sole discretion and without limitation, any
products included in inventory not included within the
Inventories purchased by Purchaser as part of the Purchased
Assets, including without limitation the Excluded Inventories
and any Excluded Products.
8.5 CONFIDENTIALITY. As a further inducement to Purchaser to enter into
this Agreement and in partial consideration of the payment to Sellers
of the Purchase Price, the Sellers agree that after the date hereof no
member of the Seller Covenant Group will divulge to any person, firm or
corporation any confidential information relating to the Business or
the economic terms of this Agreement (except as is deemed by a party to
be required in connection with public information requirements of the
federal securities laws), including without limitation customers,
customer lists, Know-How, contracts, prices, suppliers or other
business practices, unless and until (i) such information shall have
ceased to be confidential as evidenced by general public knowledge or
availability through public sources, (ii) such disclosure is required
in order for Sellers or any member of the Seller Covenant Group to
continue its business operations as contemplated by and not in
violation of this Agreement and (iii) disclosure is required under
order of a court or other body having jurisdiction, provided that
Sellers shall have given prior notice to Purchaser of any hearing or
other proceeding in which the matter of such disclosure is to be heard.
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8.6 PRESS RELEASE. The parties agree to issue only those press releases and
such other forms of public notification announcing the transaction
contemplated hereby as is consented to in advance by the other party,
such consent not to be unreasonably withheld, or as is deemed by a
party to be required in connection with public information requirements
of the federal securities laws.
8.7 ACCOUNTS RECEIVABLE; IMPROPER WARRANTY CLAIM CREDITS. The parties
acknowledge that following Closing, customers of Sellers and Purchasers
may incorrectly apply payments or credits against a party not entitled
to or responsible for such items under this Agreement. Therefore, in
such event, the parties agree as follows:
(a) Sellers and Purchaser agree to (i) remit promptly to the other
party (the "Proper Payee") all receipts which are identified
by the remitter as being applicable to sale of Products by the
Proper Payee, (ii) provide contemporaneously to the Proper
Payee copies of all documents received from the account
debtors with respect to such remittances and (iii) provide to
the Proper Payee such other reasonable cooperation as shall be
necessary to assist Proper Payee's collection of such accounts
receivable.
(b) If any customer of Sellers or Purchaser, as the case may be,
credits the value of any warranty claims against any of its
accounts payable to Sellers or Purchaser, as the case may be,
and such warranty claims were appropriately borne by the other
party under the provisions of Section 2.0(b) hereof, Sellers
and Purchaser shall reasonably cooperate to reimburse the
other party in the amount of the obligation for such credit.
8.8 INSURANCE. Following Closing, Sellers (jointly and severally) and
Purchaser each agree to obtain and maintain product liability insurance
in amounts and for such duration of time that are customary for the
industry in which the Products are sold.
8.9 FURTHER ASSURANCES. After the Closing and for no further consideration,
Sellers (on the one hand), and Purchaser (on the other) shall (a)
perform all reasonable acts (including without limitation, the use of
their commercially reasonable efforts to enable the other party to
accomplish transfer registration, permits, approvals, and the like as
contemplated by this Agreement), and (b) execute, acknowledge and
deliver such assignments, transfers, consents and other documents and
instruments as the other party or its counsel may reasonably request,
in each case, to vest in Purchaser or protect Purchaser's right, title
and interest in, and enjoyment of, the Purchased Assets or to carry out
the provisions and purposes of this Agreement.
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9.0 CLOSING MATTERS.
9.1 AUTHORIZATIONS. Sellers and Purchaser, as promptly as practicable after
the date hereof, shall (a) use commercially reasonable efforts to
obtain, or cause to be obtained, all authorizations, approvals,
consents and waivers from all Persons necessary to be obtained by them
or their affiliates in conjunction with such transaction, and (b) use
commercially reasonable efforts to take, or cause to be taken, all
other actions necessary, proper or advisable in order to fulfill their
obligations hereunder and to carry out the intentions of the parties
expressed herein. Sellers and Purchaser will coordinate and cooperate
with one another in exchanging such information and supplying such
reasonable assistance as may be reasonably requested by each in
connection with the foregoing.
9.2 PURCHASER'S INVESTIGATIONS. Purchaser acknowledges and agrees that
prior to execution and delivery of this Agreement Sellers provided to
it the names and buyer contact information for certain of Sellers'
customers, and that it has had an opportunity to make inquiry of such
customers with regard to Products and the Business.
9.3 BULK SALES COMPLIANCE. Each of Purchaser and Sellers hereby waive
compliance with the provisions of any applicable statutes relating to
bulk transfers of bulk sales. Sellers agree to indemnify and hold
Purchaser harmless from and against any and all claims of Sellers'
creditors or others asserted against Purchaser resulting from such
non-compliance, as provided in Section 11.1 hereof.
10.0 CONSENTS AND APPROVALS. This Agreement shall not constitute an
agreement to assign or transfer any interest in any instrument,
contract, lease, permit or other agreement or arrangement or any claim,
right or benefit arising thereunder or resulting therefrom, if an
assignment or transfer or an attempt to make such an assignment or
transfer without the consent of a third party would constitute a breach
or violation thereof or would affect adversely the rights of Purchaser
or Sellers thereunder. Any transfer or assignment to Purchaser by
Sellers of any interest under any instrument, contract, lease, permit
or other agreement or arrangement that requires the consent of a third
party shall be made subject to such consent or approval being obtained.
In the event any such consent or approval has not obtained on or prior
to the Closing Date, Sellers shall continue to use commercially
reasonable efforts to obtain any such approval or consent after the
Closing Date until such time as such consent or approval has been
obtained. Sellers will cooperate with Purchaser in any lawful and
economically feasible arrangement to provide that Purchaser shall
receive Sellers' interest in the benefits under any such instrument,
contract, lease, permit or other agreement or arrangement, including a
subcontract, sublease or performance by Sellers as agent, provided that
Purchaser shall undertake to pay or satisfy the corresponding
liabilities for the enjoyment of such benefit to the extent Purchaser
would have been responsible therefor if such consent or approval had
been obtained. In the case of an instrument, contract, lease, permit or
other
22
agreement or arrangement with respect to which Purchaser subcontracts
or subleases from Sellers, Purchaser will be liable only to the extent
agreed in such subcontract or sublease. Each party will pay its own
costs of seeking to obtain or obtaining any necessary or desirable
consent or approval whether before or after the Closing Date.
11.0 INDEMNIFICATION.
11.1 SELLERS' INDEMNIFICATION. Sellers, jointly and severally, hereby agree
to indemnify and hold Purchaser harmless from, against and in respect
of:
(a) any and all loss, liability, or damage, including reasonable
attorneys' fees and expenses (collectively "Damages") suffered
or incurred by Purchaser by reason of any breach of
representation or warranty or non-fulfillment or
non-performance of any covenant or agreement of Sellers
contained herein or in any certificate, document, instrument
or agreement delivered to Purchaser pursuant hereto or in
connection herewith; and
(b) any and all Damages suffered or incurred by Purchaser in
respect of or in connection with any Excluded Liabilities.
11.2 PURCHASER'S INDEMNIFICATION. Purchaser hereby agrees to indemnify and
hold Sellers harmless from, against, and in respect of:
(a) any and all Damages suffered or incurred by Sellers or either
of them by reason of any breach of representation or warranty
or non-fulfillment or non-performance of any covenant or
agreement by Purchaser contained herein or in any certificate,
document, instrument or agreement delivered to Sellers
pursuant hereto or in connection herewith; and
(b) any and all Damages suffered or incurred by Sellers or either
of them by reason or in connection with the Assumed
Liabilities following Closing.
11.3 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding SECTION 11.1 above and subject to the earlier
time limitations set forth in SECTION 4.2 hereof, Sellers
shall not be liable to indemnify Purchaser for Purchaser's
Damages, and notwithstanding SECTION 11.2 above Purchaser
shall not be liable to indemnify Sellers for Sellers' Damages,
in either case arising from or relating to a breach of a
representation or warranty set forth in this Agreement unless
the Indemnified Party notifies the Indemnifying Party in
writing of its claim or potential claim for indemnification
not later than the day which is one (1) year after the Closing
Date.
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(b) Notwithstanding SECTION 11.1 AND 11.2 above, Sellers shall not
be liable to indemnify or have any other liability arising
under this Agreement or otherwise to Purchaser for Purchaser's
Damages, and Purchaser shall not be liable to indemnify or
have any other liability arising under this Agreement or
otherwise to Sellers for Sellers' Damages, unless the
aggregate of the Indemnified Party's Damages exceeds $250,000,
and then only for the amount by which such aggregate exceeds
$250,000 (the "Basket"), PROVIDED THAT the Basket shall not
apply to any claims made by Purchaser (A) in compliance with
Section 4.2(a) hereof if and only if one or more items of
Tooling either (i) are not located at the facilities of a
Third Party Manufacturer or (ii) are inoperative or incapable
of producing the relevant Product (with Purchaser's damages
for such non-compliance to be based on the net book value of
such Tooling on SCHEDULE 5.3(a), or (B) for breach of the
representation contained in SECTION 5.3(b) regarding the
quantity or carrying cost of the Inventory. Furthermore,
Sellers shall not be liable to indemnify or have any other
liability arising under this Agreement or otherwise to
Purchaser for Purchaser's Damages, and Purchaser shall not be
liable to indemnify or have any other liability arising under
this Agreement or otherwise to Sellers for Sellers' Damages,
in excess of a total aggregate amount equal to twenty-five
percent (25%) of the Purchase Price (the "Cap"). For purposes
of this Agreement, the Escrow Amount shall be deemed included
in the Cap, and any payment of all or any portion of the
Escrow Amount to Purchaser pursuant to the Escrow Agreement
shall be credited against and reduce the Cap.
(c) The limitations contained in SECTION 11.3(a) AND 11.3(b) shall
not apply to any claim by Purchaser for indemnification based
on any breach of the representations contained in SECTIONS 5.5
OR 5.9, and the limitations contained in SECTION 11.3(a) shall
not apply to any claim by Purchaser for indemnification based
on any breach of the representations contained in SECTIONS 5.6
OR 5.7, PROVIDED HOWEVER that the survival period for
representations contained in SECTIONS 5.6 AND 5.7 contained in
SECTION 12 hereof shall continue to apply with respect to any
breaches of such sections. Furthermore, the limitations
contained in SECTION 11.3(b) shall not apply to breaches of
covenants contained in SECTIONS 2.0, 8.3 AND 8.5.
(d) Notwithstanding the foregoing, neither Sellers nor the
Purchaser will be entitled to indemnification with respect to
consequential damages or with respect to punitive damages,
except in the case of fraud or willful misconduct by the other
party. Any indemnification amounts payable by an Indemnifying
Party under SECTION 11.1 OR 11.2 shall be calculated after
giving effect to (i) any proceeds (net of retro-premium
adjustments and other expenses) actually received by an
Indemnified Party from insurance policies covering the damage
that is the subject of such claim for indemnity, and (ii) the
actual recognized tax benefit resulting from such damage.
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11.4 PROCEDURE.
(a) In order for a party (the "Indemnified Party"), to be entitled
to any indemnification provided under this Agreement in
respect of, arising out of or involving a claim made by any
Person (other than another party to this Agreement, to which
this SECTION 11.4 shall not apply) against the Indemnified
Party (a "Third Party Claim"), such Indemnified Party must
notify the other party (the "Indemnifying Party") in writing
of the Third Party Claim within fifteen (15) business days
after receipt by such Indemnified Party or written notice of
the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party
can demonstrate actual prejudice as a direct or indirect
result of such failure. Thereafter, the Indemnified Party
shall deliver to the Indemnifying Party, within fifteen (15)
business days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party
Claim.
(b) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party will be entitled to participate in the
defense thereof and, if it acknowledges in writing its
obligations to indemnify the party seeking indemnification,
subject to all provisions of this ARTICLE 11, and so chooses
to assume the defense thereof with counsel selected by the
Indemnifying Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying
Party will not be liable to the Indemnified Party for any
legal expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have
the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party, it being understood that
the Indemnifying Party shall control such defense. The
Indemnifying Party shall be liable for the fees and expenses
of counsel employed by the Indemnified Party for any period
during which the Indemnifying Party has not assumed the
defense thereof (other than after the 15-day period described
in SECTION 11.4(a) if the Indemnified Party shall have failed
to give notice of the Third Party Claim). If the Indemnifying
Party chooses to defend or prosecute a Third Party Claim, the
parties hereto shall cooperate in the defense or prosecution
thereof. Such cooperation shall include the retention and
(upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information that are
reasonably relevant to such Third Party Claim, and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material
provided hereunder. If the Indemnifying Party chooses to
defend or prosecute any Third Party Claim, the Indemnified
Party will consent to any reasonable settlement, compromise or
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discharge of such Third Party Claim that the Indemnifying
Party may reasonably recommend and which the Indemnifying
Party will pay for or perform at its sole expense. If the
Indemnifying Party shall have assumed the defense of a Third
Party Claim, the Indemnified Party shall not admit any
liability with respect to, or settle, compromise or discharge,
such Third Party Claim without the Indemnifying Party's prior
written consent, which shall not be unreasonably withheld.
11.5 INDEMNIFICATION AS EXCLUSIVE REMEDY. The indemnification provided in
this ARTICLE 11 shall be the exclusive post-closing remedy available to
the parties for any breach of representation, warranty, covenant or
agreement contained in this Agreement or any other documents,
instruments or agreements executed in conjunction with the transactions
contemplate hereby, except as may otherwise be expressly provided for
in any such document, instrument or agreement; provided, however, that
either party shall be entitled to seek injunctive relief to enforce the
provisions of the Agreement or any related agreements.
12.0 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements,
representations and warranties made by each of the parties hereto shall
survive the Closing for a period of one (1) year, except the
representations contained in (i) SECTION 5.5 and SECTION 5.9 shall
survive until the expiration of the latest applicable statute of
limitations, (ii) SECTION 5.6 and SECTION 5.7 shall survive the Closing
for a period of two (2) years and (iii) in SECTION 5.4(c) shall survive
through the end of the Tooling Claim Period and thereafter for any
period in which a claim brought pursuant to Section 4.2(a) is being
resolved. All indemnities, covenants and agreements made herein shall
survive for the period expressly indicated herein, or, if not so
indicated, indefinitely.
13.0 ARBITRATION.
(a) Any dispute, controversy or claim arising out of or in
connection with or relating to, this Agreement or any other
agreement entered into pursuant hereto, or the transactions
contemplated hereby, (a "Dispute"), including but not limited
to any breach or alleged breach hereof, shall be determined
and settled by arbitration in Boston, Massachusetts pursuant
to the rules then in effect of the American Arbitration
Association; PROVIDED, HOWEVER, that in the event the event
the Dispute involves an amount in excess of $250,000 the
Dispute shall be heard by a panel of three (3) arbitrators.
(b) The resolution of such arbitration shall be final and binding
on the parties hereto and enforceable in a court of competent
jurisdiction. The parties hereto hereby irrevocably submit to
the nonexclusive jurisdiction of any court of competent
jurisdiction for the purpose of enforcing any arbitration
award.
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(c) This ARTICLE 13 shall not preclude any of the parties hereto
from seeking injunctive or other temporary relief in any court
of competent jurisdiction in the event of a breach or
threatened breach of this Agreement or any related agreement.
14.0 NOTICES. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement
shall be in writing and shall be deemed to have been duly given when
personally delivered, one business day after being sent by express
mail, or overnight courier service, five business days after being sent
by first class registered mail, return receipt requested, or upon
confirmation of receipt of a telefax (with a copy also sent by express
mail or overnight courier services) addressed to parties at the
addresses set forth below or at such other address as any party may
specify by notice to the other parties, or, in the case of a telefax,
to the telefax number indicated:
If to Purchaser:
Conair Corporation
One Cummings Point Road
Stamford, Connecticut 06904
Attention: Ron Diamond, President
Telefax: (203) 965-8348
with a copy to:
Richard Margulies, General Counsel
Conair Corporation
One Cummings Point Road
Stamford, Connecticut 06904
Telefax: (203) 975-4658
If to Sellers:
The Holmes Group, Inc.
One Holmes Way
Milford, MA 01757
Attention: Paul A. Izzo, Esq.
Telefax: 508-634-8771
with a copy to:
Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, MA 02114
Attention: Lauren Jennings, Esq.
Telefax: 617- 367-2315
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15.0 MISCELLANEOUS.
15.1 ENTIRE AGREEMENT; MODIFICATION. This Agreement, together with the other
transaction documents contemplated by and consummated pursuant to this
Agreement, constitutes the entire agreement of the parties with respect
to the subject matter and supersedes any prior agreements, oral or
written, hereof and may not be modified, amended or terminated except
by written agreement specifically referring to this Agreement and
signed by each party hereto.
15.2 WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or similar nature.
15.3 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of each party hereto, its successors and assigns.
15.4 NUMBERS AND HEADINGS. The section and paragraph numbers and headings
contained herein are for the purposes of reference and convenience only
and are not intended to define or limit the contents of said paragraphs
or sections.
15.5 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to herein
are hereby incorporated by reference as if set out in full and form an
integral part of this Agreement.
15.6 TRANSACTION TAXES. Sellers will pay all sales, transfer and documentary
taxes, if any, and any and all further taxes arising by virtue of the
sale, transfers and deliveries to be made to Purchaser as contemplated
hereby. Notwithstanding the foregoing, gains, income and similar taxes
shall be paid by the entity or person on which such tax is imposed.
15.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
This Agreement and any agreements referenced herein or required
pursuant to the Closing may be executed and delivered by facsimile
signature. The parties agree to deliver original signatures promptly
following execution by facsimile signature.
15.8 EXPENSES. Subject to any express provisions of this Agreement to the
contrary, Purchaser shall bear the expenses, costs and fees incurred by
it, and Sellers shall bear the expenses, costs and fees incurred by
them, in connection with the transactions contemplated hereby, the
preparation and execution of this Agreement and compliance herewith.
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15.9 VALIDITY OF PROVISIONS. If any provision of this Agreement or any
agreement referenced herein shall be held or deemed to be or shall, in
fact, be inoperative or unenforceable as applied in any particular case
because it conflicts with any other provision or provisions hereof or
any constitution, statute, rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences,
clauses, sections, or subsections of this Agreement or any other
agreements referenced herein shall not affect the remaining portions
thereof.
15.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts
applicable to contracts made and to be performed therein.
15.11 USE OF TERM "SELLERS". The use of the term "Sellers" or "Seller" in any
instance shall relate to either or both of Holmes and Rival.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PURCHASER:
CONAIR CORPORATION
By: /s/ Richard A. Margulies
-----------------------------------
Its: Vice President and General Counsel
SELLERS:
THE RIVAL COMPANY
By: /s/ Ira B. Morgenstern
-----------------------------------
Its: CFO
THE HOLMES GROUP, INC.
By: /s/ Ira B. Morgenstern
-----------------------------------
Its: CFO
The undersigned, Jordan Kahn, executes this Agreement as to Sections
8.3 and 8.4 only, and for no other purpose.
/s/ Jordan A. Kahn
- ----------------------------
Jordan A. Kahn
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